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How retirement, health benefits and longevity affect household savings ?

  • El Mekkaoui de Freitas, Najat
  • Oliveira Martins, Joaquim

This paper analyses the impact of welfare systems and longevity on savings. It develops a life-cycle model embodying social transfers (health care and pension expenditures) and changes in longevity to determine the level of household savings. We simulated an aggregate saving equation and derived a reduced-form model, together with other factors such as public deficits and the population structure. The model is estimated for a panel of 18 OECD countries. Our principal result is that both pension and health transfers may have a significant negative impact on the household saving. Therefore these interactions should be taken account when designing welfare reforms.

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File URL: http://basepub.dauphine.fr/xmlui/bitstream/123456789/9826/1/ELMEKKAOUI_MARTINS_JANV_2011.pdf
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Paper provided by Paris Dauphine University in its series Economics Papers from University Paris Dauphine with number 123456789/9826.

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Date of creation: Jan 2011
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Publication status: Published in Cahiers de la Chaire les Particuliers Face aux Risques, 2011
Handle: RePEc:dau:papers:123456789/9826
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  1. David E. Bloom & David Canning & Bryan Graham, 2002. "Longevity and Life Cycle Savings," NBER Working Papers 8808, National Bureau of Economic Research, Inc.
  2. Joaquim Oliveira Martins & Frédéric Gonand & Pablo Antolín & Christine de la Maisonneuve & Kwang-Yeol Yoo, 2005. "The Impact of Ageing on Demand, Factor Markets and Growth," OECD Economics Department Working Papers 420, OECD Publishing.
  3. Midori Wakabayashi, 2008. "The retirement consumption puzzle in Japan," Journal of Population Economics, Springer, vol. 21(4), pages 983-1005, October.
  4. Martin Browning & Annamaria Lusardi, 1996. "Household Saving: Micro Theories and Micro Facts," Discussion Papers 96-01, University of Copenhagen. Department of Economics.
  5. Chakraborty, Shankha, 2004. "Endogenous lifetime and economic growth," Journal of Economic Theory, Elsevier, vol. 116(1), pages 119-137, May.
  6. Erich Battistin & Agar Brugiavini & Enrico Rettore & Guglielmo Weber, 2009. "The Retirement Consumption Puzzle: Evidence from a Regression Discontinuity Approach," American Economic Review, American Economic Association, vol. 99(5), pages 2209-26, December.
  7. Mariacristina De Nardi & Eric French & John Bailey Jones, 2009. "Why do the Elderly Save? The Role of Medical Expenses," NBER Working Papers 15149, National Bureau of Economic Research, Inc.
  8. David E. Bloom & David Canning & Rick Mansfield & Michael Moore, 2006. "Demographic Change, Social Security Systems, and Savings," NBER Working Papers 12621, National Bureau of Economic Research, Inc.
  9. Tim Callen & Christian Thimann, 1997. "Empirical Determinants of Household Saving; Evidence From OECD Countries," IMF Working Papers 97/181, International Monetary Fund.
  10. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters, in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
  11. Henning Bohn, 1999. "Social Security and Demographic Uncertainty: The Risk Sharing Properties of Alternative Policies," NBER Working Papers 7030, National Bureau of Economic Research, Inc.
  12. John Karl Scholz & Ananth Seshadri & Surachai Khitatrakun, 2006. "Are Americans Saving "Optimally" for Retirement?," Journal of Political Economy, University of Chicago Press, vol. 114(4), pages 607-643, August.
  13. Blau, David M., 2007. "Retirement and Consumption in a Life Cycle Model," IZA Discussion Papers 2986, Institute for the Study of Labor (IZA).
  14. Michael Hurd & Susann Rohwedder, 2004. "The Retirement-Consumption Puzzle: Anticipated and Actual Declines in Spending at Retirement," Working Papers wp069, University of Michigan, Michigan Retirement Research Center.
  15. Bosworth, Barry & Burtless, Gary, 2004. "Pension Reform and Saving," National Tax Journal, National Tax Association, vol. 57(3), pages 703-27, September.
  16. Martin Browning & Thomas F. Crossley, 2001. "The Life-Cycle Model of Consumption and Saving," Journal of Economic Perspectives, American Economic Association, vol. 15(3), pages 3-22, Summer.
  17. Feldstein, Martin S, 1974. "Social Security, Induced Retirement, and Aggregate Capital Accumulation," Journal of Political Economy, University of Chicago Press, vol. 82(5), pages 905-26, Sept./Oct.
  18. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, 07.
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